"We cannot solve problems by using
the same kind of thinking we used when we created
the problems." ~ Albert Einstein.

"We live in an amazing world. Everybody
has big budget deficits and big easy money,
but somehow the world as a whole cannot fully
employ itself& It is a serious question. We
are no longer talking about a single country
having a big depression, but the entire world."
~ Paul Volcker

"The war on terror is a mythical historical
narrative." ~ Zbigniew Brzezinski (former
US National Security Adviser, speaking to the
US Senate)

CRITICAL
TIDBITS

◄$$$ THE 911 FIRESTORM OF DISPUTE HAS
NEVER GONE AWAY. IT IS A CONSTANT REVULSION
REJECTION UNDER THE SURFACE. CONSIDER JUST ONE
ELEMENT, THE AIRCRAFT THAT CRASHED INTO THE
WORLD
TRADE CENTER.
IT DOES NOT MATCH ANY COMMERCIAL AIRLINER. ADD
ONE MORE ITEM TO THE GROWING PILE OF CONTRADICTORY
ELEMENTS TO THE OFFICIAL STORY. $$$

They call them the Unidentified Murder Weapons.
The aircraft that crashed on 11 September of
2001 have never been forensically matched to
the four passenger planes which were allegedly
hijacked that day. Requests under the Freedom
of Information Act have met with denials and
refusals. The documents which have been produced,
allegedly using data from the only three Black
Box flight recorders said to have been found,
have no serial numbers of the devices listed
on them. All flight recorders have serial numbers
to identify the aircraft in association. The
official investigation reads like a Keystone
Cop exercise. See the YouTube video on the subject
(CLICK HERE).

My sources indicate that the villainous
flying aircraft laden with explosives match
to Boeing tanker aircraft!! Their silhouette
matches the large underbelly profile of the
tankers used to carry jet fuel in airborne vessels,
the flying gasoline stations. For further comprehension,
check the advanced Raytheon remote guidance
systems for pilotinga, developed in the 1990
decade. Robotic flying is a standard weapon
used in the war theater nowadays. Some of the
other inconsistencies surrounding the 911 event
(Bloody Military Coup d'Etat) extend to arguments
of basic physics expressed by an American consortium
of physicists. They point to problems in the
official report as to gravity, melting point
of structural steel versus burning point of
jetfuel, and demolition propagation footprints.
An American consortium of chemists points to
the residue of thermite found in every single
sample of World Trade Center
debris collected one month after the 911 event.
Even a Danish scientific group has confronted
the issue of thermite residue, their samples
containing advanced nano elements. Thermite
is a powerful explosive. Financial forensic
analysts point to Building #7 at the WTCenter,
which contained JPMorgan bond records and Enron
data. The building collapsed without the assistance
of any aircraft crash at all.

My conclusion on the US public acceptance of
the official 911 Commission Report is that many
who accept the official story start with a conclusion
and ignore a large heap of contradicting evidence.
My conclusion is that those people who start
with a clean sheet of paper and build a case
based upon evidence and basic scientific facts
(called the Experimental Method) find it impossible
to accept much of anything about the official
story or its report. Precedent for sham reports
to cover up the crime and to seal the national
wounds go back to the Warren Commission which
attempted to close the case on the Kennedy Assassination.
In all likelihood, Kennedy was killed by interests
that control the US Federal Reserve. He had
taken initial steps to re-instate the Silver
Certificate Notes, and had fired a top CIA official.
That official sat on the Warren Commission.
In my opinion, the 911 event was the most carefully
planned and best executed Coup d'Etat in world
history. The American people (perhaps 95%) still
do not know the identity of those who took charge
of the USGovt and USMilitary. Think syndicate,
as in banks, weapons, narcotics, the chief American
swords.

◄$$$ ACCORDING TO THE USGOVT, ANOTHER
AL-QAEDA HEIGHTENED THREAT IN EUROPE IS TO BE HEEDED. REGARD IT AS YET ANOTHER RUSE WITH MOTIVE. FEAR DURING NOVEMBER ELECTIONS
IN THE UNITED STATES SEEMS THE OBJECTIVE. ALSO,
DISRUPTED TOURISM TO EUROPE
SEEMS A SECONDARY OBJECTIVE, GIVING SUPPORT
TO THE BELEAGUERED USDOLLAR. $$$

This is such a dangerous, thorny, and ugly
topic. Fear and threats of terrorism are basic
Nazi propaganda tools. Do some research of Goebbels
from Nazi Germany and his propaganda apparatus.
The basic fact not recognized much by the US population is
that the War on Terrorism is a grand ruse, a
cover for promotion of war, confiscation of
foreign resources, and expansion of a global
narcotics monopoly. The basic fact not recognized
much by the US
population is that the theme of Terrorism is
a primary plank to the Nazi tactics. Do
some research of Goebbels and propaganda strategies
from Nazi Germany during invasions of neighboring
nations. Promotion of fear was a standard tool,
with a grand benefit of the public willingness
to forfeit civil liberties. Observe the Patriot
Act. Leave me out of it.

◄$$$ INTERNET CENSORSHIP IN THE UNITED
STATES IS AN AMBITION BY CERTAIN POLITICAL GROUPS.
WHAT THE BUSH II ADMIN STARTED, THE OBAMA ADMIN
CONTINUES. THE POLITICAL THEMES ARE FIGHTING
TERRORISM AND REMOVING UNLAWFUL CONTENT. BUT
THE DEFINITION LEAVES OPEN THE BLOCKAGE OF TEA
PARTY INFORMATION AND CARTOON LAMPOONS. $$$

The Obama Admin is pressuring Internet Service
Providers (ISP) to assist in the censorship
of werbsites. The USDept Justice wishes to possess
the power to shut down a website due to unlawful
content. Intellectual Property Czar Victoria
Espinel has been holding meetings with ISPs,
registrars, payment processors, and others in
a bid to block access to websites dedicated
to infringing activities. The definition applied
is wide open, vague, and spurious. The USGovt
deems such infringement to include political
opinions which are antagonistic toward the state,
in what appears an obvious extension of 1984-style
Big Brother abuse. In the role, Espinel pursues
a special relationship between the government
and Internet companies in order to "harmonize
the efforts of law enforcement at the federal,
state, and local levels and strengthen cooperation
with the private sector."

Datamation magazine reports that one avenue
already pursued, with stated motive, to stop
websites that sell gray market pharmaceuticals.
Some opposition remains in place. ICANN, which
manages the internet domain name system, did
not attend the meeting, stating it would be
inappropriate. The meeting was convened to serve
as a secondary plan for USGovt control of the
Internet. The growing unpopularity of the current
regime toward Cyber-Security within the COICA
bills has led to their tenuous political position
for continued survival. The Combating Online
Infringement and Counterfeits Act (COICA) would
"Establish a path for the Department
of Justice to take action against websites dedicated
to peddling unlawful content, including leaning
on Internet providers, registrars, payment processors,
and other Internet players to deny services
to the offending sites." Past
precedent has demonstrated that the USDept Justice
(DOJ) considers unlawful and potential terrorist
activity the Tea Party literature posted on
public bulletin boards, as well as political
lampoons such as the Obama Joker poster.
According to a recent memo released by the Bureau
of Justice Assistance, a component of what the
DOJ considers extremist literature includes
political or religious displays, or anything
related to abortion, with direct warnings given
to radical bookstores.

If the USDept Justice uses wide definitions
on offensive abusive and forbidden material,
the USGovt will possess the tools to effectively
silence political free speech based on their
own definitions of what constitutes extremist
content. Various levels are to function in the
monitor. Federal and state authorities are considering
the implementation of technology that scans
Internet posts and emails for content deemed
to display resentment toward government,
and then passes the information to the relevant
authorities for terrorist surveillance measures.
A past precedent was outlined in March 2010,
when the independent news website The Drudge
Report was accused of serving malware. Digital
rights groups like the Electronic Frontier Foundation
and Public Knowledge have expressed concern
over how the COICA bill offers an inadequate
nebulous definition of what constitutes
a website infringement, opening the door for
the USGovt to shut down political adversaries
arbitrarily. The Obama Admin, like its predecessor,
lusts for control of the Internet. The challenges
are daunting, not only politically but technologically.
Senator Joseph Lieberman is a key supporter
of cyber-security legislation. He has pressed
for a Congressional Bill that would hand the
President power to shut down portions of the
Internet for months with no oversight. In an
interview, he told Candy Crowley at CNN that
the ultimate intention was to imitate the Communist
Chinese system of Internet policing. He said,
"Right now China, the government, can
disconnect parts of its Internet in case of
war. We need to have that here too."
See the GovTrack tracking of the mentioned legislation
pathway (CLICK HERE).

The Jackass opinion has long maintained that
enemy of the state constitutes enemies and competitors
to the ruling crime syndicate, their bank fraud
network, and their narcotics organization. Laws
that block online sports betting are disguised
attempts to obstruct narcotics trafficker competition
and their money flow. Regulations that block
water bottles onboard aircraft are disguised
attempts to obstruct the transport of diamonds.
The only true objective unbiased and free flowing
news source is the Internet, and the USGovt
with the Syndicate at the helm is well aware.
The Internet is their enemy. My forecast is
for the next supposed terrorist attack, a false
flag type like 911, will center on the Internet.
Something like an attack to take down the electrical
grid in large portions of an entire region.
That would incite a public outcry for action
and protection, handing greater powers to the
USGovt and yielding citizen rights.

◄$$$ GLOBALISTS SEEKING WORLD DOMINATION
THROUGH CREDIT PREDATION, WAR PROFITEERING,
MAYHEM, GENOCIDE, EXPLOITATION, NEWS CONTROL,
DEBT SLAVERY, AND FEAR ARE INTERRUPTED BY THE
BREAKDOWN IN THE FINANCIAL AND ECONOMIC SYSTEMS.
A TREND MIGHT BE FIRM TOWARD DE-CENTRALIZATION.
THE CURRENT PATH APPEARS TO BE IN THE OPPOSITE
DIRECTION INTENDED BY GLOBALISTS. WATCH THE
CURRENCY REVERSION EVENTS IN EUROPE
FOR MAJOR CLUES. $$

To preface, these are very dangerous topics
that might best be kept in summary form. My
preference is to touch the surface, then leave
it to individuals to pursue further. Consider
a string of mega-topics, the Globalist themes.
Much detail has been given in past Crisis Coverage
Reports on the swine flu chapter
of world history. Its central players came from
the United States
and Central Europe, with
vast collusion easily detected with Big Pharma
and centers for disease control. The toxic if
not lethal vaccinations have not been dispersed,
accepted, and injected much anymore, reduced
to a trickle after a strong degree of discovery
occurred. The genocide plan was interrupted.
The entire movement of unified continental
currency has not gained traction. Two
to three years ago, much talk centered upon
the newly planned Amero currency for usage in
North America by the US, Canada,
and Mexico.
Since then, Mexico
fell into early stages of systemic failure,
as its government gradually has been losing
control to drug cartels intent on expanding
their influence far beyond the narcotics arena.
Since then, China
has made great inroads into Canadian supply
routes whereby perhaps one quarter of the northern
resources and minerals might be committed to
China. Since then, the United
States suffered a banking
system death episode that has been carefully
disguised as a cardiac event requiring special
attention and massive aid. The Amero currency
has gone nowhere, and talk of it has ended.
Besides, the global contracts written in US$
terms could not be altered legally. It was interrupted.

Not soon after the US
financial crisis and series of mortal wounds
were reported, a fresh initiative was launched
to tax carbon dioxide. The movement of Cap
& Trade was given birth, to tax
the air we breathe, to tax the air emitted from
factories. This is the greatest sham ever conceived
in modern history. Scientists routinely discredit
the claims, as other sanctioned viewpoints from
paid compromised scientists promote the movement.
Wall Street wishes to impose $trillion taxes
on industry, the people, even residential homes
that must comply. Since a spring 2010 meeting
in Western Europe at a global gathering, which was undermined by scattered
strong contradictions of the entire foundation
of global warming, the movement lost political
traction and has fizzled. Its architects have
turned defensive, like Al Gore and Tony Blair.
The political themes of sovereign debt defaults,
large dead banks, and currency war have dominated
instead. Hardly a word is mentioned in political
circles about the carbon tax. It was interrupted.

On the horizon lie three new Globalist themes,
of much different variety, and more likely some
degree of success, with a heavy feedback, a
backlash impact. As the global currency war
and trade war pick up momentum, with epicenter
in the US-China conflict, the movement of capital
controls has become extremely important.
The exit of money from the United States will surely reach a crescendo level,
enough to trigger attempts to limit the movement
of funds out of the country. It has already
started with the big US banks, where limits on weekly wire transfers
and extensive paperwork are required before
the approval of transfers. At the present time,
US citizens can still remove money from the
domestic locations, but restrictions are growing.
My forecast is for capital controls to worsen,
to turn more restrictive, and to result in a
climax, perhaps when the banks shut down temporarily.
It will NOT be interrupted. That is the Hat
Trick Letter expectation. The entire prospect
of gold confiscation has been
a regular topic of debate, discussion, and creeping
fear. The Jackass commentaries on the topic
have been usually loaded with eagerness and
anticipation. Let them try!! It would be the
most welcome gift to gold investors worldwide.
The US
investors would have to be willing to take on
more roles in civil disobedience. Any attempt
to confiscate gold would result in a gigantic
backfire of failure. The price of gold would
skyrocket. The ineptitude of USGovt leaders
would be an example of global mockery. Their
aborted efforts would possibly lead to a string
of breakdowns in trust and confidence in all
things US$ related. The side effect, an unintended
consequence, would be the silent declaration
that gold is worth double the contrived price,
unduly affected by naked shorting of paper gold
substitutes. Confiscation will be interrupted,
since a declaration of surrender.

The alternative opposition news sources have
led to a slow barely disguised movement toward
Internet censorship, led by the
USCongress. The phony ruse of combating terrorism
has been applied, whether for communication
between villains or attacks against the US electricity grid. Attempts
in 2005 to control internet domain licenses
failed. The USCongress wanted to permit a handful
of Western communications corporations to control
all licensing, with a three-tier price system.
The Golden Jackass website, for instance, would
be subjected to a $25,000 annual fee for monitor,
management, supervision, and security functions.
The current charge is $32 annually (as in under
$100). Attempts are made each year to include
more internet controls. Senators Jay Rockefeller
(West Virginia) and Olympia Snowe (Washington) are the architects for
internet control and censorship. What they fail
to realize is that internet web technology remains,
and will continue, to be three years ahead of
the clownish attempts to control it. See contract
independent routing. Foreign relocation, like
in friendly Sweden, easily circumvents
their efforts at draconian controls. Any actual
blockage must be total shutdown. The majority
of industrialized nation supply chains have
internet dependence, as does much customer service.
Expect attempts to continue, met with steady
interruption.

A new viral movement has arrived on the scene,
one which has the potential to turn viral in
the hearts & minds of the people, and direct
anger & retribution against the bankers.
Think lawsuits and legal prosecution, even RICO
law applications. The home confiscation
initiatives, aided by assembly lines of document
forgery, false legal claims to foreclose, and
property titles lacking perfection of bond securities,
threaten to send the banker crowd into a much
more defensive position. It might result in
a shift in fashion toward orange jumpsuits,
especially for the contract lawyers at the big
banks. At issue is whether the banks operating
out of Wall Street and their Fannie Mae headquarters,
currently under USGovt supervision, can control
the states. The stubborn states have supreme
courts, legal teams, and an armada of available
attorneys to fight the syndicate. The battle
is raging, with rising volume and intensity
each new day. However, in order to fully
grasp the Globalist challenge, look no further
than the Euro currency. Not only is the
European Union in crisis, on the edge of dismantle
from a faulty foundation, but the Euro currency
is in the process of fracturing. Do not be lulled
into a secure sense from a rise in the Euro
currency exchange rate versus the USDollar.
As the sovereign debt crisis continues to rotate
around Europe like a oversized carousel, watch for reversion to former domestic
currencies instead, greater power to individual
central banks, grotesque distrust of power centers,
and great anger by the people. The European
nations want to devalue their currency, and
reversion to former domestic currencies enables
exactly that facility. The Greeks will eventually
revert to the Drachma currency. A reliable source
indicates that Germany will revert to the
DMark currency in the second half of year 2011.
Not only is a unified continental currency not
in the cards for Europe,
but an unstoppable de-centralization movement
is afoot, gaining momentum, and will not be
stopped. The direction is the exact opposite
of what Globalists would prefer, since power
will be distributed, not concentrated.

◄$$$ CAPITAL CONTROLS ARE RATCHETED UPWARDS.
OBAMA IS PUSHING TO FORCE REPORTING OF ALL FINANCIAL
TRANSACTIONS. NOTE ONE MORE SIGNAL OF SYSTEMIC
FAILURE, AS THE POWERZ ATTEMPT TO CAPTURE PRIVATE
WEALTH BEFORE ITS CONFISCATION. $$$

The Obama Admin is a mere continuation of the
Bush II Admin as far as bank welfare, war profiteering,
global warming, internet censorship, and capital
controls are concerned. Obama has gone much
farther than Bush II in measures toward capital
control. He has ordered broader cross-border
money flow monitoring. Under the thinly disguised
premise of trying to control organized crime
and terrorism, the Obama Admin has introduced
a proposal that would require US banks and Western Union to report all cross-border financial transactions, regardless
of size. The legal beagles point to potential
violations to the Constitutional implied right
to privacy, which was established with Griswold
vs Connecticut,
a landmark decision. A subsequent major decision
was the Roe vs Wade privacy ruling that struck
down laws against abortion. If this proposal
becomes law, Obama will have given insult and
disrespect to the US Constitution. The movement
by the USGovt is gathering momentum to control
capital flows in and out of the country. This
is one of the hallmarks of a failing system
and one in which devaluation of the currency
is soon to find galloping speed with great intensity.
The Powerz are giving loud signals to move wealth
quickly with dispatch into gold & silver
as defense against debasement and confiscation.
If the ruin of money does not render great damage,
the capture of money ensures imminent risk of
profound loss. A bank holiday in my view would
open the door to a grand heist. See the Truth
in Gold article (CLICK HERE).

◄$$$ OUTSPOKEN CRITICS TO BIG GOVERNMENT
AND THE BANK SYNDICATE WILL BE SILENCED, REMOVED,
OR ELIMINATED. THAT MODUS OPERANDI HAS NOT CHANGED
FOR CENTURIES. GLENN BECK WILL STEP DOWN, HAVING
MADE HIS MARK. $$$

Witness Glenn Beck and the Silence of the Lambs.
Two weeks ago, Beck announced on his radio show
that he will be taking a brief leave of absence
for medical reasons. He said, "There
is something wrong with my voice, and we are
not sure what it is. They are going to be doing
CATscans and MREs or MRIs and PET scans. They
are going to be doing blood work like crazy."
A quick monitor of his telephone or management
offices might provide a more immediate accurate
diagnosis. Surgery might remove syndicate fingers
around his throat. A shutdown was ordered by
the syndicate. That is my view. The truth will
emerge in time.

◄$$$ STUXNET WORMS HAVE INFECTED OVER
100,000 COMPUTERS. THE ORIGINAL TARGET WAS THE
BUSHEHR NUCLEAR PLANT IN IRAN.
BUT THE WORM HAS GONE GLOBAL. THE WORMS ORIGINATED FROM A NATION CLOSELY ALLIED WITH THE UNITED STATES
AND ENGLAND.
$$$

Some have called the StuxNet worm a potential
global black swan. The target was the large
Iranian nuclear reactor facility at Bushehr
and the German built Siemens equipment. However,
the worm spread much farther beyond Bushehr
in the system infections. If constrained
to Iran, the effects would likely
not have been noticed for some time, if at all.
Instead, the worm was extremely aggressive in
its infection vectors, spreading to fifteen
other Siemens plants, and tens of thousands
of other external computers worldwide. In Iran,
60 thousand computers have been infected. In
Indonesia, 10 thousand computers have been infected.
Even in the United
States, where anti-virus
layers are more a standard protection, several
thousand computers are believed infected as
well. What began as a standard Anglo data terror
campaign has rendered many corporations vulnerable
and opened the door to dangerous collateral
damage. Numerous parties, including dark cloaked
government security agencies, are racing to
reverse engineer the code and exploit the infected
machines. The infected machines contain compromised
personal details and private industrial data
not just in Iran,
but also Indonesia and India (another infection site). Some risk exists
even in the United
States for corporate trade
secrets and vital information. Melissa Hathaway
is a former United States national cyber-security chief. She
warned, "Proliferation is a real problem,
and no country is prepared to deal with it.
All of these guys are scared to death. We have
about 90 days to fix this before some hacker
begins using it."

The origin of the cyber attacks is a US ally. The infection of computer viruses and
other wooden shoes in the electronic systems
have been a standard method used since 2005.
See the Iranian and Persian
Gulf internet and telephone communication cables
being cut in underwater seabeds. The New York
Times quoted a former USGovt intelligence office
as saying that the attack was the work of Israel's
equivalent of the US National Security Agency,
known as Unit 8200. According to the IEEE Spectrum
issue in December, Israel
had previously used a cyber-attack to successfully
smother radar systems in Syria. The attack allowed
a vital probe of what it believed to be a nuclear
reactor under construction. See the Daily Tech
article (CLICK HERE).

◄$$$ A BERKELY PHYSICS PROFESSOR OBJECTS
TO THE GLOBAL WARMING DISINFORMATION. WITH HIS
INPUT, ANOTHER LEG IS PULLED FROM THE CAP &
TRADE FRAUDULENT STOOL. HE IS TOO OLD TO BE
SILENCED, KIND OF LIKE CHALMERS JOHNSON. THE
CARBON TAX IS THE LAST GASP OF THE ELITE TO
SIPHON MONEY FROM THE SYSTEM LIKE GIANT PARASITES.
$$$

Harold Lewis is professor emeritus of Physics,
University of California at Santa Barbara, and
its department former chairman; former member
Defense Science Board, chairman of its Technology
panel; chairman DSB study on Nuclear Winter;
former member Advisory Committee on Reactor
Safeguards; former member of President's Nuclear
Safety Oversight Committee; chairman American
Physical Society (APS) study on Nuclear Reactor
Safety; co-founder and former chairman of JASON;
former member of USAirForce Scientific Advisory
Board; served in US Navy in WW2; author of several
books such as technology risk and decision making.
He has the solid credentials.

Harold Lewis boldly stated, "It is
of course, the global warming scam, with the
(literally) trillions of dollars driving it,
that has corrupted so many scientists, and has
carried APS before it like a rogue wave. It
is the greatest and most successful pseudo-scientific
fraud I have seen in my long life as a physicist.
Anyone who has the faintest doubt that this
is so should force himself to read the ClimateGate
documents, which lay it bare. Montford's book
organizes the facts very well. I do not believe
that any real physicist, nay scientist, can
read that stuff without revulsion. I would almost
make that revulsion a definition of the word
scientist."

Lewis continued to hypothesize what is happening
and with what motive. The motive is tied to
money, fame, and travel perks. He stated, "I
do feel the need to add one note, and this is
conjecture, since it is always risky to discuss
other people's motives. This scheming at APS
headquarters is so bizarre that there cannot
be a simple explanation for it. Some have held
that the physicists of today are not as smart
as they used to be, but I do not think that
is an issue. I think it is the money, exactly
what Eisenhower warned about a half century
ago. There are indeed trillions of dollars
involved, to say nothing of the fame and glory
(and frequent trips to exotic islands) that
go with being a member of the club."
See the Cryptogon article (CLICK HERE).
My viewpoint is simple. Wall Street and London
City financial syndicate
dons ran out of asset bubbles to create, exploit,
and defend for government aid and rescue, while
resisting reform and restructure. They have
turned to taxing carbon dioxide, the air we
humans breathe and the air in exhaust from industrial
plants. It is the Elite's last gasp at grand
larceny. The sillyness of the concept testifies
to their desperation. Any permission by the
American public would be final proof of stupidity
worthy of removal of the species by Darwinian
natural selection. No species tribe deserves
to carry on after granting permission to tax
its air.

◄$$$ MARK MOBIUS OF TEMPLETON IDENTIFIES
A GLOBAL DEPRESSION THREAT AS A CONSEQUENT RISK
FROM TRADE WAR, CURRENCY WAR, CAPITAL CONTROLS,
AND MORE. TOO MUCH ATTENTION IS DIRECTED AT
CHINA,
AND NOT ENOUGH AT USGOVT AND USTREASURY AND
USFED POLICIES, WHICH EXACERBATE TRADE TENSIONS
AND THE CURRENCY FRAMEWORK. THE RISK OF A BAD
OUTCOME IS THE SLIDE TOWARD GLOBAL DEPRESSION.
$$$

The world risks a global depression if currency
tensions escalate. Nobody seems to give heed
to the lessons of the Smoot-Hawley experience
of the Great Depression. History is repeated,
not learned from. Rising tensions stirred
by an escalating global currency war has sparked
talk of capital controls. The effect on financial
markets would be dire, claims Mark Mobius,
executive chairman of Templeton Emerging Markets
Group. If enacted, currency controls spawn trade
wars accompanied by the strangulation of trade
restrictions. A transformation is being implemented.
Mobius expressed the viewpoint that currency
appreciation is not necessarily a bad thing
for importers of raw materials, and can provide
a structural stimulus toward greater domestic
economic development from realignment. He was
referring to China.
On the investment side, he pointed to American
Depositary Receipts or Global Depositary Receipts
linked to Chinese companies as a way to avoid
the trade war restrictions. Their investments
are not obstructed under controls.

Mark Mobius said, "We could really
move into a depression globally. I think the
linchpin of this is China
and the United States. If they
can come to some kind of agreement, then I think
we could see that softening up and tempered.
I think the Chinese are beginning to realize
that... [A gradual Yuan currency rise would]
genuinely have a beneficial impact on China. China is becoming
a more and more domestically oriented economy.
They are going to de-emphasize exports... So
a strong currency and of course moving towards
a major world trading currency is definitely
in the cards... You can be trading outside the
market even though there are capital controls.
This was the case with Argentina
for example in the recent past and in other
countries. That is one protection."

Fears of global currency and trade wars are
top of the agenda at IMF and World Bank meetings.
The preliminary Group of Seven meeting last
week had a focus on the defuse of currency tensions.
But with the US Federal Reserve expected to
introduce further Quantitative Easing measures,
the flood of easy money is set to weaken the
USDollar and trigger an appreciation in other
currencies. US policies aggravate currency tensions
mightily. The main actor in the Competing
Currency War is the United States and its monetary
policy, even while it utters accusatory words
in distraction. IMF head Dominique Strauss-Kahn
continued to harp on China, saying it needed to accelerate the appreciation
of the Yuan in order to relax tensions. He said,
"If you want to be at the center of
the system, it goes with having more responsibility
in the system. An interesting turn of words,
in which one can discern that the IMF realizes
China has become a central
global player. Heaven help the global stage
if China abuses power as the United States has done. In
June, China
pledged to let its currency respond to market
forces more freely, but the Yuan has only risen
about 2% since then. See the CNBC article (CLICK
HERE).

◄$$$ THE INCONGRUITY OF THE RATING AGENCY
POSITIONS HAS BECOME NOTICEABLY TILTED AND RIDICULOUS.
THE UNITED STATES AND UNITED KINGDOM ARE IMMUNE FROM THE REALITY OF
THEIR DEEP DEBT. FOREIGN NATIONS ARE ANGRY OVER
THE TWO TIERS AND BLATANT BIAS. THE SYSTEM INVITES
A NASTY REACTION. THE GLOBAL RESPONSE WILL BE
HARSH AND UNFORGIVING, A TICKET TO THE THIRD
WORLD FOR THE TWO ANGLO NATIONS. $$$

The farce of the rosy credit ratings given
to the USGovt and UKGovt debt has been exposed,
as the fundamental data provide a telling story
in inequality. The United
States and the United
Kingdom are bestowed sterling
clean AAA debt ratings uniformly by the rating
agencies. The rating has nothing to do with
fundamentals, and everything to do with financial
power abused. One flimsy practical argument
is that if the US and UK debt were downgraded,
the effect would be massive sales of bonds and
havoc in financial markets. Therefore, the implied
admission is that the current Western financial
markets have a fallacious foundation. In an
examination of the many European nations, considering
their sovereign debt as a percentage of GDP
(economy size), the inequality is exposed as
grotesque. Of the 28 nations compared, the UK
ranks #3 among highest deficit to GDP ratio
at 11.5% while the US ranks #5 worst at 9.9% in the debt ratio. Spain
ranks #4 with an 11.2% deficit ratio. Of the
other AAA rated nations in the comparison, even
France
has a 7.5% debt ratio. Germany
boasts a rather healthy 3.3% ratio. The Anglo
national debts and deficits are clearly unsustainable.
The movement has begun in some nations to cut
budgets and reduce expenditures. They are trying
to reduce the cost of government and the welfare
state before those costs overwhelm them and
bring ruin. In my view, their efforts are too
late to avoid that ruin, as a disaster awaits.
Austerity measures usually sink the ships of
state, economy and all, from reduced cash flow
and foreign capital flight. Many costs remain
legislated and fixed, like state worker pensions,
military and judicial pensions, and much more.
Budget deficits have become a firm fixture.

One nation conspicuously stands out as NOT
participating in any austerity measures, any
budget cutbacks, any retreat in government size.
That is the United
States. It features mounting
budgets, investment in dead banks, nationalization
of black holes (Fannie Mae, AIG), expansion
of bloated bureaucracies, and continued endless
war. Yet the USGovt debt is bestowed through
political largesse and syndicate orders a sterling
debt rating by the rating agencies, whose past
collusion with Wall Street firms has harmed
their reputations and rubbed raw their unbiased
claims. European centers observe the inequality,
inconsistency, and disparity with growing disgust.
The financial crisis and shock waves are not
confined to Europe, but
rather are global. William Buckler of the Privateer
suggests there are three means of addressing
the current crisis situation. 1) Do nothing,
aggravate the problem, inflate the debt away,
and hope the problem disappears. That is the
US method. 2) Attempt
to confront the deficit problem, even if belatedly,
and make movement toward budget cutbacks and
reduced government size. That is the European
method. 3) Buckler offers lastly, "Or
radically change the system by returning to
SOUND finances. That is the method which will
eventually prevail. Europe
is doing something to prepare its people. The
United States is not." The hypocrisy,
double standard, hegemony, and grotesque inequity,
discrimination, and profound injustice will
not continue for much longer. The rigged two
tier system that favors the Anglo nations, which
were the worst perpetrators of credit explosion,
bond fraud, and warmongering, invites a powerful
reaction response from the rest of the world.
That response in my view will send the US & UK
into the Third World.

THIRD WORLD
DESTINY

◄$$$ PAUL CRAIG ROBERTS DESCRIBES A THIRD
WORLD ECONOMY ENGRAINED IN THE UNITED STATES.
NEW EMPLOYMENT IN THE PRODUCTION OF TRADEABLE
GOODS HAS GONE OFFSHORE. NEW EMPLOYMENT IN DOMESTIC
SERVICE BOUND ONSHORE REMAINS THE GROWTH PATCH.
THOSE JOBS TEND TO BE LOW INCOME, LOW SKILL,
LOW SECURITY, LIKE THE CORE OF THIRD WORLD ECONOMIES.
$$$

Paul Craig Roberts served as Assistant Secy
Treasury in the Reagan Admin, and former associate
editor of the Wall Street Journal. He put forth
a harsh editorial that describes the labor force
into a proper perspective. "The wage
and salary cost savings obtained by giving Americans
jobs to Chinese and Indians have enriched corporate
CEOs, shareholders, and Wall Street at the expense
of the middle class and America's
consumer economy. The loss of middle class
jobs and incomes was covered up for years by
the expansion of consumer debt to substitute
for the lack of income growth. Americans refinanced
their homes and spent the equity, and they maxed
out their credit cards. Consumer debt expansion
has run its course, and there is no possibility
of continuing to drive the economy with additions
to consumer debt. Economists and policymakers
continue to ignore the fact that all employment
in tradable goods and services can be moved
offshore (or filled by foreigners brought
in on H-1b and L-1 visas). The only replacement
jobs are in non-tradable domestic services,
that is, those jobs that require hands-on activity,
such as ambulatory health services, barbers,
cleaning services, waitresses, and bartenders,
which are jobs that describe the labor
force of a Third World country. Even
many of these jobs are now filed with foreigners
brought in on R-1 type visas from Russia,
Ukraine, Thailand,
Romania,
and elsewhere. The loss of American jobs and
the compression of consumer income by low wages
has removed consumer demand as the driving force
of the economy. This is the reason why expansionary
monetary and fiscal policies are having no effect.
The latest jobs report issued today shows that
Americas transformation into
a Third World economy continues. The economy
lost 95,000 jobs in September, mainly due to
cuts in local education and federal employment.
Part of the loss of 159,000 government jobs
was offset by 64,000 new private sector jobs.
Where are the new jobs? They are in non-tradable
lowly paid domestic services: 32,000 were in
health care and social services, and 33,900
were in food services and drinking places. There
you have it. That is America's New Economy." That is not
the new economy, but rather the margin that
offers growth.

◄$$$ CALLS OF AMERICA
BEING AN EMERGING MARKET HAVE BEGUN. THESE ARE
PRELUDE TO RECOGNITION LATER OF ENTRANCE IN
THE THIRD WORLD. A BETTER DESCRIPTION IS THE
USECONOMY IS A SUBMERGING MARKET. IT CAN BECOME
AN EMERGING ECONOMY ONLY AFTER IT HITS BOTTOM
IN A FEW YEARS, IN A PLACE CALLED THE THIRD WORLD. SOME UNIQUE BIZARRE TRAITS CAN ALSO
BE CITED CONCERNING THE U.S. EDUCATION SYSTEM, AS
THE NATION IS AN EXTREME ANOMALY. $$$

An interesting debate on CNBC was presented
in early October on whether the United States should be classified
as an emerging market for investment purposes.
The opponent mocked the arguments without a
single substantial denial raised as a contradicting
factor. The nation exhibits many of the risk
factors traditionally correlated with developing
markets. For example: 1) Out of control debts,
2) Crony capitalism socialism or whatever one
might call it, 3) Decision making at the government
level dominates all facts of economy and markets,
4) Dysfunctional government controlled by powerful
groups, 5) Growing chasm between Rich &
Poor classes, 6) Dysfunctional financing whereby
the Treasury issues debt, and the central bank
purchases it. The argument offered a conclusion
challenge. "If I gave you those risk
factors and did not say which country it applied
to, the majority of people would say 'That
is an emerging market.' " See the
Fund My Mutual Fund article (CLICK HERE).

My view runs parallel but deeper, consistent
with the emerging market, but with a different
timeline. The United States Economy is not
emerging from anything, anywhere, anytime soon.
It is still in deep deterioration mode. It is
better described as a Submerging Economy,
since going backwards, which is what recession
means. Its crises are reaching full blossom,
with streaks of corruption laced throughout.
The nation might qualify as an Emerging Economy
at a later date, when it has completed an important
degradation phase that might result in a climax
collapse or debt default. A nation on the verge
of debt default is hardly emerging, a baseless
claim!! Add a few items to the list of factors
and characteristics to support the above argument.
For example, add: A) Insolvent banks under government
subsidy, B) Profound political interference,
intervention, involvement in the economy, C)
Deep corruption in all financial channels including
the money creation, D) Dysfunctional credit
engines that favor the big banks in control,
E) Lack of capital investment for economic development,
F) Crumbling ancient infrastructure (object
of talk but no action), G) Heavy import dependence,
H) Lack of domestic business investment, I)
Oppressive government regulation and consequent
cost to business, and J) Narcotics involvement
by its government agencies. Sorry, but my added
factors might describe strong Third World Nation
traits, my error. Witness the billboard signs
on the way to the Third World, from which the nation might someday emerge from, but not
yet. The timing is off.

Norman Augustine of Lockheed Martin recently
completed a Competitive Educational study on
the United
States. What the study
concluded is bizarre, not complimentary, and
somewhat shocking to those whose eyes have been
covered. The US
as a nation produces more graduates in visual
& performing arts than math & science.
It noted that math & science typically form
the path to higher living standards. The main
problem with the college & university system
is its top-heavy administration structure, but
it still has a good student-teacher ratio (for
now). The US as a nation has a high dropout rate for students
at the secondary level, among the worst in the
industrial world. It has a lowly #45 rank in
educational scores internationally, but a #3
rank in spending per student, which screams
inefficiency, big overhead, and waste. The study
found a pervasive situation exists where teachers
do not have expertise in their subjects. Foreigners
dominate in expertise, as education is a mainstay
exported service. Fully two thirds of the PhD
degrees granted are to foreigners. Foreigners
complain of some difficulty coming to the US and even more
difficulty in staying.

My personal experience at Carnegie Mellon Univ
in the graduate program (ended in 1980) revealed
that half of students in the doctoral program
were foreigners, and several were my friends.
Only one professor was foreign born, a man from
Taiwan with rather good english.
The foreign students came from England,
Austria,
Romania, Yugoslavia
(Montenegro),
Sudan, Ghana,
and several from Taiwan.
The Taiwanese distinguished themselves, as they
led in many areas and were helpful to younger
students (like Tiaopin to me). None at CMU in
my department came from India,
a surprise. But at the Staples HQ during my
five years there, several Indian MBAs worked
in finance and accounting posts, curiously the
only foreigners. The Staples executive staff
was dominated by native Harvard MBAs. Years
ago, several colleagues at Digital Equipment
Corp (DEC) came from India, one in my group from Pakistan (by way of Wharton).
A raft of Indian engineers at DEC were top notch.
Few foreigners occupied DEC executive posts.

◄$$$ DEBT IN THE UNITED STATES IS GROWING
MUCH FASTER THAN INCOME. AN EVENT IS COMING
TO SHOCK THE SYSTEM, A CERTAIN KICK INTO THE
THIRD WORLD. INCOME IS SOON TO HAVE FURTHER
DOWNWARD SHOCKS FROM ACCELERATED JOB LOSS AND
BUSINESS SHUTDOWNS. AT HEAVY RISK IS LIFE SAVINGS.
THE GAP BETWEEN DEBT AND INCOME IS WIDENING,
TO A SHOCKING LEVEL, A FACTOR TO DICTATE A BREAKDOWN
IN THE SYSTEM. $$$

◄$$$ THE UNITED STATES LEADS THE WORLD
IN DEBT/REVENUE RATIO. MANY ANALYSTS FOCUS ON
CUMULATIVE DEBT/ECONOMY RATIO, WHICH IS FINE.
OTHERS FOCUS ON ANNUAL DEFICIT/ECONOMY RATIO,
WHICH IS ALSO FINE. BUT REVENUE INCLUSION GIVES
THE ALL IMPORTANT INDICATION OF FOREIGN FUNDED
DEBT. $$$

John Mauldin makes a fine argument on revenues
serving the most important indication. From
the inception of the Hat Trick Letter, a mainstay
Jackass argument has been that foreign funded
debt would eventually undermine national sovereignty.
In other words, the nation must cater to foreign
interests and constantly bend, even in secret
fashion, so as to maintain deficit finance.
Although pressures are present here and now
from foreign priorities, the USGovt, being of
a fascist nature and combative to ally and enemy
alike, has turned hostile to USTreasury creditors.
The revenue inclusion dictates the health story,
since deficits not covered by internal revenue
must be financed by foreigners. In fact, modern
history teaches that foreign flight paves the
way to national ruin. In the case of the United
States, the abuse of the
US$
Printing Pre$$ has been indispensable in financing
debt through monetization, often hidden, usually
in high volume, always deceitful, surely desperate.
Creditors abhor such monetization practice,
since it acts as an involuntary debt writedown
forced upon them by dictum.

John Mauldin wrote, "It is not GDP
but government revenues that matter. Whatever
the size of a government's liabilities, what
matters ultimately is how they compare to the
resources available to service them. One
benefit of sovereignty is that governments can
unilaterally increase their income by raising
taxes, but they will only ever be able to acquire
in this way a fraction of GDP. Debt/GDP therefore
provides a flattering image of government finances.
A better approach is to scale debt against
actual government revenues. An even
better approach would be to scale debt against
the maximum level of revenues that governments
can realistically obtain from using their tax
raising power to the full. This is, inter alia,
a function of the people's tolerance for taxation
and government interference. Seen from this
angle, the US federal debt no longer compares quite so favourably
with that of European governments."
Can you say Third World debt? Deep monetization of debt is a major Third World feature. Notice that on the Debt/Revenue ratio, the United
States trails Greece!!
See the Market Oracle article (CLICK HERE).

ASPECTS OF SYSTEMATIC FAILURE

◄$$$ THE BREAKDOWN SEQUENCE WILL GATHER
MOMENTUM AND OCCUR MORE QUICKLY THAN MOST PEOPLE
IMAGINE. COMPLEX SYSTEMS ARE COLLAPSING BEFORE
OUR EYES. LINEAR PATHWAYS HAVE ENTERED WARP
ZONES. UNPREDICTABLE EVENTS ARE IN PROGRESS.
AN AVALANCHE OF DEBT IS READY TO COME DOWN THE
MOUNTAIN. INSOLVENCY WILL MAGNIFY TO MUCH GREATER
LEVELS, ONLY TO BECOME DEPENDENT ON PRINTED
MONEY. GOLD & SILVER ARE THE PREPARATIONS
FOR SURVIVAL. $$$

Chris Martenson lays out a brief but poignant
article that cuts directly to the core of the
numerous problems. He summarizes them well.
The main theme he presents is that moments
of discontinuity are coming soon, if not already.
More financial breakdowns are imminent, perhaps
bigger than previous crisis events. Hard walls
will be encountered to the usual remedy policies.
No linear pathways will be available. The
problems will seem to accelerate, both with
greater frequency and greater intensity.
He said, "When the next moment of discontinuity
finally arrives, events will unfold much more
rapidly than most people expect... But far too
many people expect events to unfold in a more
or less orderly manner, with plenty of time
to adjust along the way. In other words, linearly...
We still face the convergence of multiple trends,
each of which alone has the power to permanently
transform our economic landscape and standard
of living." He cited peak oil as a
major challenge, but my focus is on the mention
of sovereign insolvency and currency debasement.
A big breakdown toward systemic failure is nigh,
but its timing is as difficult to predict
as when an avalanche of snow strikes the lower
grounds. The accumulation of debt creates
the risk. Its mass of hardpacked snowy debt
will cause unspeakable damage.

In sovereign debt, most nations have set up
pension and entitlement programs that render
their states as insolvent on a chronic basis.
Any shortfalls can be funded only with a bright
economic future, and strong recoveries. But
huge future deficits are built in. The USGovt
official deficit is likely to grow by $9 trillion
in the next decade. A string of sovereign
defaults lie in the future, whose fuses are
criss-crossed from interconnected borrowings.
This topic was addressed in Hat Trick Letter
reports earlier this year. Each nation's banks
own debt from other neighbor nations. Each nation
has significant trade with other neighbor nations.
Martenson warns that attention must be directed
to the shape, timing, and severity of the aftermath
of economic wreckage that is certain to come
from upcoming sovereign defaults.

In the currency wars, one of my key themes,
nations have resorted in knee-jerk fashion to
printing money in order to attempt to find relief
from both economic distress and banking system
insolvency. Currency debasement results. Martenson
describes the Competing Currency War, and reminds
that all nations cannot win simultaneously
in the battle to debase currencies, yet they
will try. He misses a great big point though,
since all nations will lose, with no winners
at all!! Political support is easy to muster
for printing money to dig a way out of the morass.
He urges preparation for a global program of
currency debasement as a guaranteed aspect of
the economic future. My view extends to the
effect of the currency war, the race to the
bottom, which results in a uniformly higher
cost structure, further ruin of the capital
base, lower incomes, finally a corporate breakdown
and economic failures. The quantum drop
in standard of living will be the grand shock,
and the ticket stub to the trip into the Third
World. Debt will not be financed, and must be
restructured with great losses incurred. A domino
effect follows with bank failures, since many
banks own outsized blocks of supposedly safe
sovereign debt. Safe havens will be ravaged.
Prepare for non-linear events, big surprises,
even shocks, grand disruptions like to the supply
chain, and gradual choas taking root. The supply
chain woes will cause civil unrest and riots.
See the Martenson article entitled "Prediction:
Things Will Unravel Faster Than You Think"
on Gold-Eagle (CLICK HERE).

◄$$$ THE USFED INSOLVENCY WILL BECOME
A STARK REALITY SOON, VISIBLE AT A GLOBAL LEVEL,
LIKE IN A FISHBOWL. THE MORTGAGE FORECLOSURE
SCANDAL WILL TURN MUCH MORTGAGE BOND PAPER INTO
WORTHLESS HANDI-WIPE TISSUES. THE USFED BALANCE
SHEET WILL QIUCKLY APPROACH MINUS $1 TRILLION
WITHIN A YEAR. PRESSURE TO CONTINUE THEIR FUNCTION
WILL BECOME ACUTE IN THE COMING MONTHS. $$$

USFed insolvency and quitting never enters
the minds of analysts. My forecast in mid-2009
was for the USFed to move from a $500 billion
hole on their balance sheet to a full $1 trillion.
The stage is set for precisely that next quantum
leap in red ink flow with large holes blown
in their balance sheet. The mortgage bonds they
bought at phony high value have lost much value.
They will lose much more value in the coming
months. They must find a way to dump toxic debt
on the ever-willing USGovt, like in the Fannie
Mae back door. That is surely another big reason
why it was nationalized. The Chinese forced
the nationalization in summer 2008, if truth
be known. The White House chooses not to
jump on the populist bandwagon to halt all foreclosures
in a moratorium, since their masters own the
USFed. They do not wish to accelerate the lethal
powerful losses on their increasingly acidic
balance sheet. The accomplice USDept Treasury
is equally worried about the asset backed bond
market. Mortgage bonds hold the foundation for
the entire housing market, with home loans the
connective tissue. The Fannie Mae cesspool just
turned a couple points higher on pH acidity
level. The USGovt is on the hook for the Fannie
Mae gigantic vats that they fully adopted. Regard
the Treasury Secy Geithner as the custodial
officer of the Fannie Mae fields of financial
effluent of the most toxic variety. Thus
he will defend their vats. The USGovt has given
a formal guarantee, no longer quasi or implicit,
but rather an explicit guarantee on $trillions
in Govt Sponored Enterprise bonds, the Fannie
Mae and Freddie Mac mortgage bonds supposedly
backed by properties. However, developments
during the last few weeks have highlighted the
dubious linkage to any title claims at all.
Calling a moratorium on foreclosures would accelerate
the fracture that has already grown as wide
as the Mississippi River.
The TARP Fund grand fraud and larceny solidified
and tightened the Fannie Mae guy wires and oversized
cables connecting the GSE mortgage bonds. The
nationalization of Fannie & Freddie was
not so much to exploit the profit potential.
It was to conceal for as long as possible the
colossal fraud in the mortgage industry, and
to create a toxic dumping ground.

The USFed owns nearly $1.5 trillion of toxic
assets that have no bid, no market, and no integrity.
That is a giant hole burned in their balance
sheet. By being without a bid, that means any
bond professional has an extreme challenge to
argue or justify any inherent value whatsoever.
Only the USFed offered demand for them, since
the mortgage bond market was at high risk of
near total collapse. The nation has returned
to the same critical point two years later,
since nothing was fixed. Now the USFed and USDept
Treasury do not want to undermine the broken
mortgage bond market, by adding greater uncertainty
about the home loans that serve as their backbone.
If foreclosed homes cannot be sold because
of fraudulent paperwork, imagine the difficulty
in selling assets chockfull of faulty or fraud-ridden
loans. Chaos would ensue in the bond market,
with ripple effects to USTreasurys. The nation
is gripped with the challenge or finding a property
title for a foreclosed home, and some homeowners
are demanding proof of title before evacuating
during foreclosure. Others have stopped mortgage
payments until they are satisfied the bank actually
holds the title. The next chapter to this
nightmarish systemic national scandal is verification
of the related home loans within asset backed
securities, a key income stream claimed.
Then further still, an impossible challenge
comes in removing the home loans out of a pyramid
of securities sitting on top of it. Think Collateralized
Debt Obligation, heavy leverage, and unaccountability.
We are witnessing perhaps a financially violent
transformation into a communist society, starting
with individual property rights!!

The USThe banking industry is exposed for $3
trillion in losses from mortgage bonds that
have tenuous if not absent linkage through viable
claims to properties, their residual sale value,
their mortgage payment revenue stream, or even
their rental income stream upon reclassification
to rental properties after separation from homeowners.
The USFed and USDept Treasury do NOT wish
to throw gasoline on the mortgage bonfire that
has spontaneously erupted. This bonfire
will erupt naturally on its own, and the bank
leaders know it. The Treasury is directly backing
$400 billion of GSE securities, and is indirectly
backing another $6.8 trillion by virtue of mortgage
insurance. Given the tight link guarantee between
the Fannie Mae bonds and the USGovt, one can
hardly distinguish them from USTreasury Bonds.
If the linkage is further removed from
the asset in securitization, the Fannie Mae
bond reverts to a USTreasury Bond. Thus
the chain link threat to the USDollar. Thus
the revulsion by foreign creditors to the US$-based
debt securities in general. The USGovt and US central bank do not wish to aid the disconnection
process. See the Zero Hedge article (CLICK HERE).

Fannie Mae wishes to avoid the entire home
foreclosure process. That is why Fannie cleverly
offers the home rental option. Just give the
USGovt your tired, your poor, your huddled masses
of property titles and the US Constitution provision
of personal property rights will be one step
closer to total shredding, an Elitist objective.
One nation under banks, by the banks, and for
the banks. This is no joke!! One can be most
assured that the contract and document paperwork
at Fannie & Freddie is a big pile of melted
rotten spaghetti with rancid meat sauce. Anyone
who would challenge the USGovt to produce their
property title before making a single additional
monthly mortgage payment, well, that would be
too nasty and even revolutionary. Maybe it is
justice. Henry David Thoreau would be proud
of the civil disobedience, the title of his
famous essay, one had a profound effect on the
young Jackass.

◄$$$ BERNANKE WARNS IN A LONG DETAILED
SPEECH OF FINANCIAL AND ECONOMIC COLLAPSE IN
PROGRESS. SUCH AN HONEST ASSESSMENT COULD NEVER
BE GIVEN BY HIM IN FRONT OF THE USCONGRESS.
SOME MIGHT ACCUSE BERNANKE OF A LAPSED FIT OF
LUCID HONESTY. OTHERS MIGHT CONCLUDE THAT BEN
COMPREHENDS THAT USGOVT FINANCES AND USBANK
FINANCES ARE BOTH ON DEATH ROW. BEN MIGHT HAVE
EXPERIENCED AN EPIPHANY OF PURE LIGHT AND TRUTH.
BERNANKE MUST REALIZE THE UNITED STATES IS ON
THE BRINK OF FINANCIAL CATASTROPHE. DEAD AHEAD
IS THE THIRD WORLD. $$$

Credit must be given where due. The US
bankers have managed to keep the charade and
carousel going much longer than sound money
analysts expected. On October 4th, USFed Chairman
Bernanke delivered a speech before the the Annual
Meeting of the Rhode Island Public Expenditure
Council in the capital Providence.
In the speech, Ben warned that the current
state of the government finances was dire and
unsustainable. Consider a stream of
his main points, permit a summary of his major
points, each a shocking dose with reality. Never
would he dare deliver such a message to the
USCongress, where the standard fare is optimism,
deception, baseless forecasts, errant complexity,
and basic gibberish. The following are the thoughts
of the chairman, lucid thoughts. The Jackass
believes he is attempting to provide an alibi
to forced reckless monetary policy, for his
memoirs, so history will treat him sympathetically.

Bernanke believes that future budget deficits
and debts could rise indefinitely. "Almost
by definition, unsustainable trajectories of
deficits and debts will never actually transpire,
because creditors would never be willing to
lend to a country in which the fiscal debt relative
to the national income is rising without limit...
The needed fiscal adjustments will be a rapid
and painful response to a looming or actual
fiscal crisis... Countries that continually
spend beyond their means suffer slower growth
in incomes and living standards and are prone
to greater economic and financial instability."
He referred loosely to the shock from some form
of USTreasury debt default, with restructure.
He admitted to the severe budgetary pressures
to the state governments and the federal government.
He described the deterioration of the USGovt
finances, with lower revenue due to the recession
and greater costs to alleviate the recession
and stabilize the financial system. The current
wretched fiscal condition resembles the period
immediately following World War II. He admitted
that the budget deficit is large. "Economic
conditions provide little scope for reducing
deficits significantly further over the next
year or two... If current policy settings are
maintained, and under reasonable assumptions
about economic growth, the federal budget
will be on an unsustainable path in coming years,
with the ratio of federal debt held by the public
to national income rising at an increasing pace.
Moreover, as the national debt grows, so
will the associated interest payments, which
in turn will lead to further increases in projected
deficits. Expectations of large and increasing
deficits in the future could inhibit current
household and business spending." He
mentioned how the constant fiscal duress within
the federal budget constrains the flexibility
of fiscal policy to respond to current or new
economic conditions. He expects Obama Health
Care coupled with an aging population to greatly
aggravate the fiscal situation. Medicare and
Social Security are entrenched hemorrhages.
He painted a bleak picture for the global economy
and foreign fiscal condition as well. He pointed
out that Europe and Japan
are older in demographics than the United
States population. However,
he did not mention that the US
population is the most unhealthy of any industrialized
nation.

Bernanke emphasized the heightened risk to
the overall USEconomy. He gave stern warning,
but ironically he must heed his own warning.
Monetary inflation is eroding capital, which
he must realize. "Failing to address
our unsustainable fiscal situation exposes our
country to serious economic costs and risks...
In the longer term, a rising level of government
debt relative to national income is likely to
put upward pressure on interest rates and thus
inhibit capital formation, productivity,
and economic growth. Larger government
deficits increase our reliance on foreign lenders,
all else being equal, implying that the share
of US national income devoted
to paying interest to foreign investors will
increase over time. Income paid to foreign
investors is not available for domestic consumption
or investment. And an increasingly large cost
of servicing a growing national debt means that
the adjustments, when they come, could
be sharp and disruptive. For example,
large tax increases that might be imposed to
cover the rising interest on the debt would
slow potential growth by reducing incentives
to work, save, hire, and invest... The threat
to our economy is real and growing, which should
be sufficient reason for fiscal policymakers
to put in place a credible plan for bringing
deficits down to sustainable levels over the
medium term."

After an impressive steady stream of lucid
logic bound in realism, Bernanke concluded with
delusion and wishful thinking. He identified
ways the USCongress could rein in spending and
make the tax system more efficient. He must
not realize that the august body has no motive
to do so, nor ability, and certainly every bribed
incentive to continue its servitude to the banking
industry. Banks donated $200 million to shape
(if not write) the Financial Regulation Bill.
The jist of his speech was his dire warning
of the financial crisis just ahead. See the
Economic Policy Journal article (CLICK HERE).
To catch a hint of the deep risk for USGovt
debt shock, contrast the meter of private debt
resolution versus the absence of federal debt
resolution. The federal bubble has yet to burst.
When it does, all hell will break loose, and
the United States through the various powerful natural
forces, will find itself suddenly knee deep
in the Third World, a place
it has read about but never experienced.

◄$$$ THE FASCIST BUSINESS MODEL LIES
AT THE HEART OF THE NATIONAL ECONOMIC PATHOLOGY.
THE BIGGEST BANKS ARE BEING SAVED AS A NATIONAL
PRIORITY, AT THE RISK OF ECONOMIC COLLAPSE.
FEAR OF DEPRESSION IS WIDELY SPREAD IF THEY
ARE PERMITTED TO FAIL. THE NATION WILL PLUNGE
INTO A DEPRESSION IF THEY DO NOT FAIL.
THE OUTLET IS THE FAVORITE FASCIST DEVICE, NAMELY
WAR. THE CONSTANT IS ANOTHER FASCIST DEVICE,
PROMOTION OF AND PREOCCUPATION WITH TERRORISM.
$$$

Almost every prominent independent economist
has concluded that the giant banks must be broken
up, in order to enable the national economy
an opportunity to recover. They are clogging
the entire credit system, the credit markets,
and the credit generation. Midsized and small
banks actually lend more to businesses than
the mega-banks, and thus serve the USEconomy
more effectively. The foreclosure scandal
is just the latest episode of Wall Street corruption
in a long skein. Unless the big US banks are broken up, their vast crippled portfolios
given the liquidation flush, the entire banking
sysetm will remain grotesquely warped, and the
credit engines will operate in a continued dysfunctional
manner. If not, the propped financial markets
will remain in permanent rigged status. If not,
derivatives will never be pulled under control.
If not, unemployment will keep rising. If not,
the big banks will continue to not only dominate
US politics, but control the USDept Treasury
and most finance committees in the USCongress.
If not, then then the representative form of
government in the United
States will suffer a sudden
death. The tragic truth in my view is
that refusal to send the big banks into the
liquidation & restructure mill invites marxist
collectivism at best, and martial law at worst.
The risk of lost property and legislating poverty
is the prospect of the former, and rationed
supplies is the prospect of the latter. A class
struggle cometh.

◄$$$ THE I.M.F. ADMITS THAT THE WEST
IS STUCK IN NEAR DEPRESSION, AND AUSTERITY MEASURES
WILL LIKELY BACKFIRE. THE WOES OF SOUTHERN
EUROPE ARE EXPECTED TO RESULT IN AMPLIFIED ECONOMIC
DAMAGE, SINCE THE OVERVALUED EURO CURRENCY LIMITS
MONETARY POLICY REACTION. THE STAGE IS SET FOR
A EUROPEAN MONETARY UNION BREAKUP, AND MOVE
BACK TO FORMER CURRENCIES. THE ECONOMIC DAMAGE
WILL NEXT BE FELT, COMPLETE WITH FAST GROWING
FISCAL DEFICITS. $$$

Bring to the table the interpreter to filter
the latest Intl Monetary Fund report. In Chapter
Three of the IMF World Economic Outlook offers
a bleak forward view that condemns Southern
Europe to death by slow suffocation and leaves
little doubt that fiscal tightening will trap
North Europe, Great
Britain, and the United
States in slump for a long
time. The report misses or sidesteps the
systemic failure in progress. France
and Spain,
caught in the overvalued Euro currency speed
trap, decided to call national strikes. The
IMF report entitled "Will It Hurt? Macroeconomic
Effects of Fiscal Consolidation" makes
the case convincingly that austerity measures
will do more damage than so far admitted.
They claim that in normal times, tightening
federal spending by 1% of GDP in one country
leads to a 0.5% loss of growth after two years.
The current nightmare involves the entire global
economy, stuck in the mud of insolvency. The
IMF actually admitted that all nations cannot
simultaneously devalue their currencies with
benefits, an awakening to the Competing Currency
War without recognition of its rotations of
destruction. Nobel economist Joe Stiglitz warns
a great dam might break in parts of Europe, setting off a death spiral in his words. The IMFund acknowledged
the risk of doubled damage for states that cannot
cut rates or devalue currency, stuck in the
Euro straitjacket. Consider Spain,
Portugal,
Ireland, Greece,
and Italy,
all trapped in the European Monetary Union (common
Euro currency) at overvalued exchange rates.
The notion of amplified economic damage heaped
upon nations with fixed exchange rate regimes
has hit the discussions. The political justifications
for reversion to former currencies is being
made clear.

◄$$$ JIM GRANT DELIVERS A HARSH INDICTMENT
OF THE USFED FOR ITS LETHAL INTERVENTIONS INTO
THE USECONOMY. THE BREADTH AND DEPTH OF THEIR
INVOLVEMENT HAS CREATED CONDITIONS THAT REQUIRE
A PERMANENT ROLE. THEIR REMOVAL FROM A HEAVY
ROLE PLAYED INVITES A SYSTEMIC COLLAPSE. HE
PAINTS A PICTURE OF THE AMERICAN POLITBURO.

$$$

Jim Grant of the Grant Interest Rate Observer
delivered an unusually harsh crticism. Couple
it with the Volcker diatribe, and the criticism
is at shrill levels. Grant accused the USFed
of Lethal Intervention and widespread manipulation
of the USEconomy. He stopped short of claiming
the nation's economy and financial system have
failed. He implied that without their continued
prop role, the US system would fail. The
charge of lethal interventions goes hand in
hand with the implied necessity of ongoing props,
which cannot be removed. The nation is exiting
capitalism and entering something perverse,
whose core is a deeply corrupted fascism. In
an interview with Pimm Fox of Bloomberg, Grant
refers to H Parker Willis, one of the founders
of the Federal Reserve in 1913. In a book written
in the 1930 decade, Willis openly regretted
the creation and very existence of the USFed.
As Grant said, "Willis was present at
the creation of the Fed. He was one of the draftsmen
of the Federal Reserve Act of 1913. Willis was
also the first secretary of the Federal Reserve
Board. He knows this institution. He wrote a
book in 1936, which was a lamentation about
the lowly state of Central Banking in America, the Fed having lost
its way in 1936. It had opened its doors in
1914 and by 1936 it had eaten the forbidden
fruit. It was in the business of guiding the
economy, of managing the economy, of manipulating
the aggregate... It is a wonderful tract against
the tendency of the Fed to do what it has so
lethally done to this economy in my opinion,
which is to steer us. In the interest of raising
the GDP, it presses interest rates to zero,
pouring out immense volumes of econometric studies
in support of this dubious enterprise."Grant and Willis described the American Politburo,
a soviet entity that now operates on entrenched
US
soil. The criticism delivered by Grant heralds
great change or monumental breakdown. See the
Zero Hedge article (CLICK HERE).
My view is the breakdown will precede the change,
which will occur only after much more fraud,
much more systemic broken planks, much more
USGovt largesse toward the banks, and much more
attempts at justice.

◄$$$ AMBROSE URGES TO SHUT DOWN THE USFED,
WHICH IS REVIVING PROVEN DESTRUCTIVE IDEAS.
THEY ARE DOING ONLY WHAT THEY KNOW, INFLATE.
THEY CONTINUE TO DO WHAT THEY HAVE ALWAYS DONE,
DESTROY. THEY WILL PRODUCE A HIGHER COST STRUCTURE
WITHOUT HIGHER NATIONAL WAGES. MONETARY THEORIES
BEHIND KEYNESIAN PRINCIPLES ARE BEING SEQUENTIALLY
DISCREDITED. $$$

As preface, one must focus on the claim that
USFed Chairman Bernanke called the USDollar
Printing Pre$$ an efficient electronic tool
that spews out money at zero cost, useful in
crisis prevention. He was boasting of the extreme
tools the United States possesses to
combat economic stagnation and bank system woes.
Remember that thought, since the high cost
of the monetary inflation gone into hyper-drive
is destruction of the entire economy. That
is the opposite of zero cost, rather infinite
cost. The blind spot of American economists
is their lack of realization that their policies
destroy capital, displace industry, and wreck
savings within the USEconomic system. What Bernanke
fails to comprehend is capital destruction.
Easy money has turned almost free, but with
greatly reduced demand, a concept the bankers
cannot explain.

Ambrose Evans-Pritchard has undergone a transformation
with linked awakening. He finally comprehends
the destructive power of the USFed. For a full
year, he has defended their emergency stimulus
policies. He has argued vigorously that "the
USFed would not succumb to drug addiction, political
abuse, and mad intoxicated debauchery, once
it began taking its first shots of Quantitative
Easing. My pathetic assumption was that Ben
Bernanke would deploy further QE only to stave
off DEFLATION, not to create INFLATION.
If the Federal Open Market Committee cannot
see the difference, God help America." Where the USFed fails is perception
of deflation when inflation runs risk, and perception
of inflation when deflation runs risk. They
have a firm track record of fighting the last
war and producing the next monster. Ambrose
laments his support, when he admits to the epiphany.
He read the recent FOMC minutes and saw the
USFed is willing "to provide additional
accommodation if needed to & return inflation,
over time, to levels consistent with its mandate."The USFed plans to produce inflation. THEY
WILL SUCCEED, but with great collateral damage
in a higher cost structure without income gains.
They wish to secure political blessing in
their mission. They will earn only rebuke.

Ambrose traces blame back to abandonment of
the Inflation Target, a new turn in policy by
Bernanke. It is evident from their active desire
to generate more inflation. Harken back to 1996,
fourteen years ago. His predecessor Alan
Greenspan abandoned controls placed on monetary
growth in favor of monitoring the price inflation.
The Inflation Target was born, a travesty, like
the alarm bell turned off, or the window given
a facade painting to mask the horizon view.
They watched the CPI doctored to stay low in
the late 1990 decade, then proceeded to generate
one asset bubble after another until the banks
died, households went insolvent, jobs vanished,
and federal deficits shot over $1.5 trillion
annually. THAT IS THE GREENSPAN LEGACY!! The
Greenspan decision to place careful focus on
the distorted CPI to warn of price inflation
turned out to be disastrous. Now Bernanke plans
to drop the Inflation Target, and to pump the
monetary press until the banks revitalize to
show a stronger balance sheet, or until the
consumer demand revives, or until job growth
returns. They are blind fools, heretics in high
priest robes, economic morons. The USFed is
going down the same path as the Weimar Republic,
rationalizing its steps, ignoring the risks,
after having done revisionist history tabloid
writing. See Von Havenstein, head of the Weimar
Reichsbank, who knew his path would lead to
wreckage, aside Bernanke, who is ignorant of
each demon that appears around the next corner.
Bernanke has missed every single turn in the
financial crisis, which the Jackass has laid
out, all in progress and in advance. Ben looks
to be praying not to preside over catastrophe.
It reminds me of a man whose PhD dissertation
is being refuted convincingly.

Ambrose admits his errors in defending the
hyper-inflating establishment cabal. He tips
his hat to critics who sent a steady stream
of negative if not nasty emails to the UK Telegraph.
He admits the USFed is out of control, having
lost its way. He describes the current justification
with an historical light. He shows confusion
though in accepting Friedmanite preachings,
as the Quantitative Theory of Money has been
blown to smitherines. The adopted rationale
has been laid out. Ambrose summarized it, saying
"The dangers of tipping into a debt
compound trap, as described by Irving Fisher
in Debt Deflation Theory of Great Depresssions
in 1933, outweigh the risk of an expanded money
stock catching fire and setting off an inflation
surge later."He incorrectly calls
Debt Deflation a toxic process that can and
does destroy societies as well as economies,
which is not to be trifled with. Debt deflation
kills off the guilty banks, a necessary process
to eradicate corruption, which he overlooks.
He sees the destructive path of hyper-inflation
from monetary growth, while missing that debt
deflation has a great tremendous positive outcome
as in the bankruptcy tunnel. The problem
with debt deflation, known by many as liquidation
of bad debt and toxic assets, is that the process
removes from power the main control agents of
the USGovt and UKGovt, and at the same time
invites a series of nuclear financial explosions
lit from the basement of credit derivatives.
By abhoring the debt cleanup process, Ambrose
ignores the entire bankruptcy gift to recovery
pathways, a key cornerstone of capitalism. He
leans favorably on a pickup evident in the money
velocity, when it is like saying the dead man
has crawled out of the gutter to the edge of
the sidewalk.

Ambrose closes with a reference to the Competing
Currency War heating up. The Bank of Japan has
embarked on unsterilized currency intervention,
which amounts to stimulus. That means they do
not neutralize one currency infused by purchase
of the other's bonds in offset. The USFed and
the Bank of England are signalling fresh Quantitative
Easing initiatives. Their previous efforts failed,
so do it again. Ambrose advises "If
the US is not in deep trouble, the Fed should not
be thinking of extra QE. It should step
back and let the economy heal itself, if necessary,
and endure several years of poor growth to purge
excess leverage. Yes, U6 unemployment is 16.7%.
But as dissenters at the Minneapolis Fed remind us, you cannot solve a structural
unemployment crisis with loose money. Fed is
trying to conjure away the hangover from the
last binge (which Greenspan & Bernanke caused,
let us not forget), as if to vindicate its prior
claim that you can always clean up painlessly
after asset bubbles." He is delusional
except for realizing loose money cannot promote
job growth. Time does not bring about a recovery.
It requires a restructure and liquidation of
broken pieces and excess debt fat. Nothing remotely
like such has happened!!

The passage of time will bring continued economic
breakdown and systemic failure. A QE2 will
bring about a few months of relief but with
heavy burden immediately of a higher cost structure,
a point missed by economists. The same economic
breakdown and systemic failure will occur, but
with a higher cost platform. My
forecast is for at least two more QE initiatives,
a QE2 starting this December, and a QE3 starting
one year later. Each will lift the cost structure.
Neither will aid the income levels, just as
the QE1 never touched the income level. Neither
will promote job growth, the constant nightmare.
Ambrose raises the specter of the Americans
and the British being so decadent that they
will refuse to take their punishment, opting
to default on their debts by stealth. This is
the Chinese accusation. See the UK Telegraph
article (CLICK HERE).
Analogies are helpful at times. It reminds me
of a drunk sleeping in the gutter because he
can drink runoff water. The drunk returns to
the bottle of booze because it is so familiar,
and it seems cleaner. One of the most amazing
human characteristics is the attraction of the
familiar, even when it is clearly destructive,
even when it is killing the person. In time,
death is welcomed as an end. Recovering addicts
are familiar, as this allegory is old school.

◄$$$ MARTIN HUTCHINSON ACKNOWLEDGES CAPITAL
DESTRUCTION AND THE MARCH TO THE THIRD WORLD.
THE HEAVY COST OF PROMOTED ASSET BUBBLES IS
ABANDONED, LIQUIDATED, AND UNKEPT CAPITAL. AMERICA
IS LEFT WITHOUT ENGINES OF WEALTH, ONLY MOUNTAINS
OF DEBT. $$$

Martin Hutchinson is a fine analyst, with association
to the Prudent Bear. Hutchinsonforecasts
a powerful USEconomic recession, and ongoing
haphazard attempts to manage wreckage from a
sequence of failed asset bubbles. He makes
a point consistent with the Jackass, that the
chronic strong monetary inflation has destroyed
significant capital, which he called de-capitalization.
The US
economic hacks have given consistent political
support and advocacy of clean industry, thus
the paved road to financial engineering palaces
that toppled. Hutchinson wrote, "That, not temporary slowdowns in current
economic activity, will cause a Double-Dip US recession, and a very nasty
second dip it will be. What's more the Fed,
by engineering collapsing bubbles successively
in dotcoms, housing, and now junk bonds and
leveraged loans, will have de-capitalized
the USEeconomy. Savings have been suppressed
for close on two decades, preventing the natural
accumulation of capital as Baby-Boomers drew
closer to retirement, while the majority of
the country's magnificent and unmatched capital
stock will have been poured down a succession
of ratholes. In an era of globalization,
the result of such de-capitalization will be
a rapid downwards convergence of US living standards
towards those of the less provident members
of the Third World. Ben Bernanke may
well be remembered in 2100, while all other
Fed Chairmen within 50 years either side of
him have been forgotten. But to the impoverished
mass proletariat of that era, he will be known
as the Bernard Madoff of monetary policy."
See the Prudent Bear article (CLICK HERE).

Americans were lured repeatedly into asset
bubble participation instead of saving. They
gambled instead and now find themselves largely
without pensions or much in life savings. The
savings would have supplied industry, which
has also mostly left town and left the country.
When imagining de-capitalization, bring to mind
cutting the head off industry, the legitimate
engine of income.

FIRESTORM
FORECLOSURE SCANDAL◄$$$ TAKE THE TIME TO READ
THE FOLLOWING EXTREMELY ADEPT AND THOROUGH DESCRIPTION
OF THE MORTGAGE BOND AND FORECLOSURE SCANDAL.
IT HAS GONE VIRAL!! IT HAS THE POTENTIAL
TO CHANGE THE NATION, ITS PERCEPTION OF BANKER
FRAUD, AND THE ENTIRE CONCEPT OF HOME OWNERSHIP.
IT HAS THE POTENTIAL TO HASTEN SYSTEMIC FAILURE,
EVEN USTREASURY DEFAULT. IT HAS THE POTENTIAL
TO ENCOURAGE BROAD CIVIL DISOBEDIENCE. THIS
IS A COMPLICATED SETTING. THIS ANONYMOUS SUMMARY
IS THE BEST YET. PERSONALLY, IT VALIDATES AND
CONFIRMS MY STATED CLAIMS IN OPEN FORUMS THAT
THE UNITED STATES FINANCIAL SYSTEM HARBORS PROTECTED
SOPHISTICATED CORRUPTION OF THE HIGHEST ORDER.
$$$

John Mauldin received an anonymous commentary
on the mortgage and foreclosure scandal that
is extremely comprehensive and well
worth the time to read, review, and absorb.
The source comes from inside the financial services
business. It was written out of disgust and
dismay, heavily edited by Mauldin himself to
remove angry profanity. Quotes will not put
be in place. The entire commentary is presented
from his source verbatim, delivered by Kotok.
It is not a Jackass interpretation or analysis.
Many thanks to Mauldin for its publication.
What follows comes from inside the bank world:

Homeowners can only be foreclosed and evicted
from their homes by the person or institution
who actually has the loan paper. Only the
note holder has legal standing to ask a court
to foreclose and evict. Not the mortgage, the
note, which is the actual IOU that people sign,
promising to pay back the mortgage loan.
Before mortgage backed securities, most mortgage
loans were issued by the local Savings &
Loan. So the note usually did not go anywhere.
It stayed in the offices of the S&L down
the street. But once mortgage loan securitization
happened, things got sloppy. They got sloppy
by the very nature of mortgage backed securities.
The whole purpose of MBSs was for different
investors to have their different risk appetites
satiated with different bonds. Some bond customers
wanted super safe bonds with low returns, some
others wanted riskier bonds with correspondingly
higher rates of return.

Therefore, as everyone knows, the loans
were bundled into REMICs, Real Estate Mortgage
Investment Conduits, a special vehicle designed
to hold the loans for tax purposes,
and then sliced & diced, split up and put
into tranches, according to their likelihood
of default, their interest rates, and other
characteristics. This slicing and dicing created
senior tranches, where the loans would likely
be paid in full, if the past history of mortgage
loan statistics was to be believed. And it also
created junior tranches, where the loans might
well default, again according to past history
and statistics. A whole range of tranches was
created, of course, but for the purposes of
this discussion we can ignore all those countless
other variations. These various tranches were
sold to different investors, according to their
risk appetite. That is why some of the MBS bonds
were rated as safe as Treasury bonds, and others
were rated by the ratings agencies as risky
as junk bonds.

But here is the key issue. When an MBS was
first created, all the mortgages were pristine.
None had defaulted yet, because they were all
brand new loans. Statistically, some would default
and some others would be paid back in full.
But which ones specifically would default? No
one knew, of course. If I toss a coin 1000 times,
statistically, around 500 tosses the coin will
land heads. But what will the result be of,
say, the 723rd toss? No one knows. Same with
mortgages. So in fact, it was not that the riskier
loans were in junior tranches and the safer
ones were in senior tranches. Rather, all
the loans were in the REMIC, and if and when
a mortgage in a given bundle of mortgages defaulted,
the junior tranche holders would take the losses
first, and the senior tranche holder last.
But who were the owners of the junior tranche
bond and the senior tranche bonds? Two different
people. Therefore, the mortgage note was not
actually signed over to the bond holder. In
fact, it could no't be signed over. Because,
again, since no one knew which mortgage would
default first, it was impossible to assign a
specific mortgage to a specific bond. Therefore,
how to make sure the safe mortgage loan stayed
with the safe MBS tranche, and the risky and/or
defaulting mortgage went to the riskier tranche?

Enter stage right the famed MERS, the Mortgage
Electronic Registration System. MERS was the
repository of these digitized mortgage notes
that the banks originated from the actual mortgage
loans signed by homebuyers. MERS was jointly
owned by Fannie Mae and Freddie Mac, like the
chlamydia and the gonorrhea of the financial
world. The purpose of MERS was to help in the
securitization process. Basically, MERS directed
defaulting mortgages to the appropriate tranches
of mortgage bonds. MERS was essentially where
the digitized mortgage notes were sliced and
diced and rearranged so as to create the mortgage
backed securities. Think of MERS as Frankenstein's
operating table, where the beast got put together.
However, legally, and this is the important
part, MERS did not hold any mortgage notes.
The true owner of the mortgage notes should
have been the REMICs. But the REMICs did
not own the notes either, because of a fluke
of the ratings agencies. The REMICs had to be
bankruptcy remote, in order to get the precious
ratings needed to peddle mortgage backed Securities
to institutional investors. So somewhere
between the REMICs and MERS, the chain of title
was broken.

Now, what does 'Broken Chain of Title' mean?
Simple: when a homebuyer signs a mortgage, the
key document is the note. As I said before,
it is the actual IOU. In order for the mortgage
note to be sold or transferred to someone else,
and therefore turned into a mortgage backed
security, this document has to be physically
endorsed to the next person. All of these signatures
on the note are called the 'Chain of Title.'
You can endorse the note as many times as you
please, but you have to have a clear chain of
title right on the actual note. I sold the note
to Moe, who sold it to Larry, who sold it to
Curly, and all our notarized signatures are
actually, physically, on the note, one after
the other. If for whatever reason any of
these signatures is skipped, then the chain
of title is said to be broken. Therefore, legally,
the mortgage note is no longer valid. That
is, the person who took out the mortgage loan
to pay for the house no longer owes the loan,
because he no longer knows whom to pay. To repeat:
if the chain of title of the note is broken,
then the borrower no longer owes any money on
the loan. Now you see the can of worms that
is opening up.

The broken chain of title might not have been
an issue if there had not been an unusual number
of foreclosures. Before the housing bubble collapse,
the people who defaulted on their mortgages
would not have bothered to check to see that
the paperwork was in order. But as everyone
knows, following the housing collapse of 2007
to 2010 and counting, there has been a boatload
of foreclosures, and foreclosures on a lot of
people who were not sloppy bums who skipped
out on their mortgage payments, but smart and
cautious people who got squeezed by circumstances.
These people started contesting their foreclosures
and evictions, and so started looking into the
chain-of-title issue, and that is when the paperwork
became important. So the chain of title
became crucial and the botched paperwork became
a nontrivial issue.

Now, the banks had hired 'Foreclosure Mills,'
law firms that specialized in foreclosures in
order to handle the massive volume of foreclosures
and evictions that occurred because of the housing
crisis. The foreclosure mills, as one would
expect, were the first to spot the broken chain
of titles. Well, what do you know, it turns
out that these foreclosure mills might have
faked and falsified documentation, so as to
fraudulently repair the chain-of-title issue,
thereby 'proving' that the banks had judicial
standing to foreclose on delinquent mortgages.
These foreclosure mills might have even forged
the loan note itself. Wait, why am I hedging?
The foreclosure mills did actually, deliberately,
and categorically fake and falsify documents,
in order to expedite these foreclosures and
evictions. Yves Smith at Naked Capitalism, who
has been all over this story, put up a price
list for this 'service' from a company called
DocX. Yes, a price list for forged documents.
Talk about your one-stop shopping! So in other
words, a massive fraud was carried out, with
the inevitable innocent bystanders getting caught
up in the fraud. The guy who got foreclosed
and evicted from his home in Florida,
even though he did not actually have a mortgage,
and in fact owned his house free and clear.
The family that was foreclosed and evicted,
even though they had a perfect mortgage payment
record. Et cetera, depressing et cetera.

Now, the reason this all came to light is not
because too many people were getting screwed
by the banks or the government or someone with
some power saw what was going on and decided
to put a stop to it. That would have been nice,
to see a shining knight in armor, riding on
a white horse. But that is not how America works nowadays. No,
alarm bells started going off when the title
insurance companies started to refuse to insure
the titles. In every sale, a title insurance
company insures that the title is free and clear,
that the prospective buyer is in fact buying
a properly vetted house, with its title issues
all in order. Title insurance companies stopped
providing their service because. Of course,
they did not want to expose themselves to the
risk that the chain of title had been broken,
and that the bank had illegally foreclosed on
the previous owner. That is when things started
getting interesting. That is when the attorneys
general of various states started snooping around
and making noises, since elections are coming
up, after all.

The fact that Ally Financial (formerly GMAC),
JP Morgan Chase, and now Bank of America have
suspended foreclosures signals that this is
a serious problem, obviously. Banks that
size, with that much exposure to foreclosed
properties, do not suspend foreclosures just
because they are good corporate citizens who
want to do the right thing, and who have all
their paperwork in strict order. They are halting
their foreclosures for a reason.

The move by the United States Congress last
week, to sneak by the Interstate Recognition
of Notarizations Act? That was all the banking
lobby. They wanted to shove down that law, so
that their foreclosure mills forged and fraudulent
documents would not be scrutinized by out-of-state
judges. The spineless cowards in the Senate
carried out their master's will by a voice vote,
so that there would be no registry of who had
voted for it, and therefore no accountability.
And President Obama's pocket veto of the
measure? He had to veto it. If he had signed
it, there would have been political hell to
pay, plus it would have been challenged almost
immediately, and likely overturned as un-Constitutional
in short order. But he did not have the gumption
to come right out and veto it. He pocket vetoed
it. As soon as the White House announced the
pocket veto, the very next day, Bank of America
halted all foreclosures, nationwide.

Why do you think that happened? Because
the banks are in trouble, again, over the same
thing as last time, the damned mortgage backed
securities! The reason the banks are
in the tank again is, if they have been foreclosing
on people they did not have the legal right
to foreclose on, then those people have the
right to get their houses back. And the people
who bought those foreclosed houses from the
bank might not actually own the houses they
paid for. And it will not matter if a particular
case, or even most cases, were on the up &
up. It will not matter if most of the foreclosures
and evictions were truly due to the homeowner
failing to pay his mortgage. The fraud committed
by the foreclosure mills casts enough doubt
that, now, all foreclosures come into question.
Not only that, all mortgages come into question.

People still have not figured out what all
this means. But I will tell you. If enough
mortgage paying homeowners realize that they
may be able to get out of their mortgage loans
and keep their houses, scott-free!!
That is basically a license to halt payments
right now, thank you. That is basically a license
to tell the banks to take a hike. What are the
banks going to do, try to foreclose and then
evict you? Show me the paper, Mr Banker, will
be all you need to say.

This is a major, major crisis. The Lehman bankruptcy
could be a spring rain compared to this hurricane.
And if this is not handled right, and handled
right quick, in the next couple of weeks at
the outside, this crisis could also spell the
end of the mortgage business altogether. Of
banking altogether. Hell, of civil society.
What do you think happens in a country when
the citizens realize they do not need to pay
their debts ???

◄$$$ SOME FINAL COMMENTARY, WRITTEN BY
THE JACKASS WITH GREATLY MIXED EMOTIONS. THEY
ARE SADNESS, SHOCK, DISAPPOINTMENT, SHAME, EXCITEMENT,
SATISFACTION, DISGUST, ANGER, DISBELIEF, AND
DESIRE FOR JUSTICE. SYSTEMIC FAILURE IS IN PROGRESS
BEFORE YOUR EYES. ITS DRIVING FORCE IS BANKER
CRIMINAL BEHAVIOR. SEVERAL MONTHS FROM NOW,
CALLS WILL COME FOR NUREMBERG
BANKER TRIALS. THE NATION IS AT RISK OF MARTIAL
LAW FROM CHAOS. THIS IS MY OWN VIEWPOINT. $$$

The kiss of death is the fraudulent MERS
title vehicle. Later, the kiss of the funeral
coffin will be the fraudulent REMIC finance
vehicle. The class action lawsuits just
received a huge energized positive push. A systemic
risk to the US
financial system from the foreclosure scandal
is more than acute, since stark, public, and
obvious. In time this could lead to a big bank
shutdown holiday within the next couple months,
like Christmas or before February. The invocation
of RICO in civil lawsuit actions taken opens
a grand door to threaten the very existence
of Wall Street. Its call will force extreme
pressure on the USCongress to water down the
provisions of RICO asset seizures, or to pave
the way for ex-post-facto bond fraud forgiveness.
The fraud has been a constant in US finance, including the USGovt. The states versus
the federal government could be the ultimate
battleground.

The scandal is going viral in my view, possibly
to result in a global boycott of USTreasurys,
but starting with a boycott and dumping of USAgency
Mortgage Bonds. If the truth of premedicated
fraud with concerted coverup is exposed, understood,
and accepted, the USTreasury and USDollar will
collapse within a month or two. The site of
greatest risk is Fannie Mae, being the collector
of toxic waste in bond securities. If mortgage
bonds are declared worthless by the courts,
a tipping point for a USTreasury Bond default
could be progress of occurring. The bridge to
chaos is the potential for Civil Disobedience,
people refusing to make their mortgage payments.
If hundreds of thousands of home loan holders
consult with lawyers to demand proper title
before continuing to pay on mortgages, the chaos
could accelerate. In a year, perhaps 50% of
people will not pay their mortgage!! This is
a potential systemic failure lever event in
the making. Never lose sight of the fact
that the USFed holds $1.5 trillion in mortgage
bonds. If they are declared worthless, the USFed
dies!! That could be the inroad to USTreasury
default!!

A sense of reassurance comes to see at least
three State Supreme Courts take action. They
have imposed a moratorium freeze on home foreclosures.
The states have been obstructed in their Tenth
Amendment initiatives to separate from the USGovt
over the Wall Street fraud and federal bailouts.
However, imposition of state rights on foreclosure
gives them the avenue to cut some cords. The
properties lie in the states, which have direct
jurisdiction. The cords are from Wall Street
firms though in the challenged foreclosure cases.
Given the tight linkage between USGovt finance
ministry control by Wall Street, the state challenges
to the USGovt authority can be more successful
through the Wall Street front. If the USCongress
forgives $trillion fraud in full view, the states
might declare some unique independence from
the federal system, on the basis of federally
sponsored racketeering.

The US
press is beginning to catch wind of the depth
of fraud. Ten days ago, the anchors were saying
only 10% of the documents were faulty. Therefore,
a moratorium seemed out of proportion. One week
later, they were openly questioning whether
40% to 50% of the documents were faulty. The
media avoids the word FRAUD and prefers the
word ERRORS. Recall the denial in 2007 over
the subprime mortgage episode, and claims the
bond market damage was limited. That lesson
has taught the analysts and press networks alike
that the true problem is likely much bigger
than the banks admit. The other lesson is that
the private analysts and media pundits have
learned big lessons on the ineptitude of the
USFed itself to detect problems and crises in
advance. It is not clear that court spectacles
will take place. The spectacles will instead
be public demonstrations that could easily turn
violent.

The battle will be inside the USCongress over
sweeping amnesty of Wall Street firms. No potential
exists for out of court settlements on a meaningful
scale unless they are done in class action cases.
Watch Fannie Mae, both a fraud participant but
a potential recipient of mortgage payments in
doubt. The big banks might be forced to assign
rights over to Fannie Mae in resolutions, like
in exchange for forgiveness of broad committed
fraud. The most egregious Robo-Signed document
was the Patriot Act, which in fact few legislators
read admist coercion and vivid palpable threats.
Most USCongress Bills are not read, just signed,
since their marching orders are contained within,
after the banks or insurance firms or defense
contractors or pharmas write the bill. The systemic
failure that the Jackass has written about in
the last three years is coming to center stage,
with broad recognition, and acceptance in shock.